Gold Vs. USD

Data/Charts Provided By Jack Chan

Gold is trading up strongly up today $7+ to approximately $678 /lb, while the USD index is down sharply to 82.40. We are coming to critical points in these two items and it's no coincidence either.

You can see the very bearish picture painted by this graph. Some folks were encouraged by the push up in 2005, only to have their hopes shattered when the index failed to break above its 50 day MA. It has been trading well below its 50 day MA for over a year now. The bearish triangle formed gives the last pillar of support at 80.50. Once it breaks below that level we will be in uncharted territories and this will sound the sell alarms across the world.

The gold picture is equal and opposite.

The triangle formed is very bullish here with its next resistance point set around $730-740 /oz. In a previous post I discussed how the USD index will test the 80.50 level a couple times before breaking through it. We've been there once. Is it enough?

I don't know, but I would like to note a couple of items of importance. It is possible that the USD index forms a double bottom and gold forms a double top. This would signal a correction in the price of gold.

On the other side, this is the wedding season. There is a large increase in demand for gold by jewelers. This is also the same time of year we saw the huge break out in gold to its 26 year high.

One can't forget about the wild cards here. First, is the trade tensions between the U.S. and China. It is obviously bearish for the USD. As the U.S. continues to take actions, through the WTO, or on there own, I expect this confrontation to continue to put downward pressure on the USD.

Also, Iran and any other global conflict seems to be hiding around the next dark corner. This would be very bullish for oil and gold.

Anyhow, you know where I stand, as I expect to see a record high in the price of gold. If there is a correction, look for gold to pull back to its 50 day MA and that will be a tremendous buying opportunity.